As a leading tax firm specializing in nonprofit organizations, we understand the critical importance of comprehensive risk management for not-for-profit leaders. While you diligently protect your facilities, assets, staff, and clients, have you considered the potential legal and tax liabilities facing your volunteers? Despite the protections offered by the federal Volunteer Protection Act of 1997, volunteers remain vulnerable to lawsuits and tax implications stemming from their actions while serving your organization.
State-specific Considerations
While the Volunteer Protection Act provides a baseline of defense, it’s essential to recognize that liability laws can vary significantly from state to state. Each state may impose different limits, conditions, and exceptions, necessitating a tailored approach to risk management. Some states offer broad coverage, while others require nonprofits to expressly assume liability in their articles of incorporation. Therefore, it’s imperative to stay informed about the legal landscape in your jurisdiction.
Insurance Solutions
To mitigate risk effectively, your nonprofit should invest in comprehensive insurance coverage. This includes general liability insurance specifically tailored to cover volunteers, as well as directors and officers liability insurance. If volunteers operate vehicles on behalf of your organization, it’s crucial to verify whether your auto insurance extends coverage to them. Moreover, larger organizations may consider amending their bylaws to include a robust indemnification clause for volunteers, especially when claims exceed insurance limits.
Proactive Risk Management
In addition to insurance, proactive risk management strategies can further safeguard your organization and its volunteers. Implementing thorough screening and training processes for volunteers helps mitigate the risks of harm or injury. Certain client-facing activities should be restricted to paid staff members to minimize liability exposure. By investing time upfront in vetting and preparing volunteers, you not only protect your organization but also enhance the overall volunteer experience.
Tax Compliance Awareness
Beyond legal liabilities, nonprofits must also be mindful of potential tax implications for volunteers. Providing benefits or compensation beyond reimbursement for actual expenses can inadvertently create taxable income for volunteers. It’s essential to educate volunteers about the tax implications of reimbursements exceeding actual expenses and ensure transparent documentation of expenses incurred on behalf of the organization.
Consultation and Collaboration
Navigating the complexities of volunteer risk management requires ongoing collaboration and consultation with legal professionals. Particularly for nonprofits providing medical services or working with vulnerable populations, the stakes are higher, and proactive legal counsel is invaluable. By prioritizing the protection of volunteers and the organization’s mission, you ensure a safer and more sustainable future for all stakeholders.
At Accavallo & Company, we’re committed to empowering nonprofits with the knowledge and resources needed to navigate legal and tax complexities effectively. Contact us today to learn more about our specialized services tailored to your organization’s unique needs. Together, we can strengthen your risk management practices and safeguard your nonprofit’s mission for years to come.
